Medical liability: A world of difference

As states and health care systems seek federal grants to test new ways of tackling medical liability issues in the U.S., some observers suggest looking beyond America’s borders for inspiration. While they agree no one system offers a perfect solution, experts say other countries could offer lessons to help mend what doctors say are flaws that make the U.S. medical liability landscape more expensive and litigious than that of other nations. “Nobody is as hospitable to potential liability as we are in this country,” said Richard A. Epstein, director of the law and economics program at the University of Chicago Law School. “The unmistakable drift is we do much more liability than anybody else, and the evidence on improved care is vanishingly thin.” U.S. litigation costs overall are at least twice those in other developed countries, such as Canada and much of Europe, according to a 2008 study by the Manhattan Institute’s Center for Legal Policy. Experts have estimated U.S. medical liability claims to be roughly 10% of all tort litigation, with at least half of related expenses going to legal costs rather than compensating patients. It’s important to recognize that foreign legal schemes differ significantly from those in the U.S., said Philip K. Howard, founder and chair of Common Good, a nonprofit organization that promotes liability reform and helped develop a health court model in the U.S. But a glimpse overseas reveals various features that, above all, appear to promote consistency. “Instead, we have a system that strives for unreliability. Standards of care as a matter of law are decided by a jury, thumbs up or thumbs down. No other country does that, and no other country has the legal fear that has created,” he said. “If it’s a legitimate claim, let [patients] be compensated. … It’s the unreliability that’s counterproductive here.” Judges vs. juries The U.S. is among the few countries that put medical liability cases almost exclusively in the hands of jurors, whereas elsewhere — in Canada, Japan and most of Europe, for example — such issues are decided by judges. The benefit in those nations is the elimination of a largely adversarial process that can encourage extreme claims and awards, Epstein said. In Germany, judges often run their courtrooms on tight schedules to resolve disputes quickly. “Their entire framework is designed to reduce it to routine administration, whereas our system is high drama,” Epstein said. In Canada, every province except Quebec gives parties the option of a jury trial, though it is rarely chosen, said John E. Gray, MD. He is executive director and CEO of the Canadian Medical Protective Assn., which provides medical liability coverage to a majority of the country’s doctors. Fewer than 1% of the nearly 17,000 new cases filed nationwide in 2008 went to trial, according to the company’s 2008 annual report. “There is a general reluctance to use them because of the complexity of [medical liability] cases,” Dr. Gray said. In the United Kingdom, judges tend to be more familiar with such cases, and awards end up being relatively consistent, said Tony Mason, CEO of the Medical Protection Society. The London-based medical defense company covers physicians in the U.K., Ireland and several other countries. “If you have exactly the same [two] plaintiffs in front of different courts, there would be a difference in the judges’ awards. But they would be pretty darn close,” he said. Canada and the U.K. also cap the amount of pain and suffering damages judges can award at about $350,000 and $400,000, respectively. Such limits have helped control costs, particularly for smaller claims involving less serious injuries, Mason said. Damages in the U.K. are decided based on a sliding scale. Beyond costly payouts, however, critics of the U.S. legal system point to expensive contingency fees that encourage lawyers to chase big awards when they can collect 30% to 40% if they win. That’s something most European countries prohibit, said Otmar Kloiber, MD, secretary general of the World Medical Assn., a group of national medical societies. The U.K. limits lawyers to collecting twice the amount of their fees. “So there is not that much incentive to make a commodity out of the business of law. … That would be seen as completely unethical in Europe.” Canada, Europe and Australia also make the loser bear the other side’s legal fees, which has been credited with discouraging frivolous litigation, according to the Manhattan Institute study. Critics of loser-pays rules and bans on contingency fees say such efforts discriminate against patients who can’t afford to pursue a claim. For similar reasons, Canada’s loser-pays rule is rarely invoked, Dr. Gray said. “The reality is, most plaintiffs are not in a position to pay.” Likewise, in 1985, Florida abandoned a loser-pays law that applied to medical liability cases after finding that victorious defendants were unable to collect from insolvent plaintiffs. Howard said such laws could be viewed in the U.S. as restricting patients’ access to the courts, which might cause legal problems. Damage caps also have been known to evoke constitutional battles in the U.S. And with state constitutions guaranteeing the right to a jury trial, models that eliminate that component raise similar hurdles, said Michelle Mello, a professor of law and public health at Harvard University’s School of Public Health in Boston. While the jury system may create inconsistencies, “it’s not clear whether a judge-based system is superior in general, and how much of the problem with juries could be addressed if they were just better educated,” she said. But Mello called compensation structures that account for the severity of a patient’s individual injury “a significant improvement over a one-size-fits-all [award limit] that does provide the predictability people point to as a benefit of a flat cap.” Compensation vs. competence Other foreign models separate compensation from liability determinations through so-called no-fault systems similar to the U.S. workers’ compensation system. In New Zealand and some Scandinavian countries, injury claims bypass the courts and go through a public administrative system to determine if a medical error was avoidable and compensation is warranted. Damages are decided according to a pre-set schedule based on the type of injury. “One problematic aspect of our [U.S.] system is we make people prove negligence in order to get compensation,” which not only is difficult but also adds to the cost and adversarial nature of the process, Mello said. Claims in the no-fault systems are resolved within months as opposed to the years it takes a lawsuit to make its way through the courts, and awards are moderate, according to a study co-authored by Mello in the January 2008 Social Science & Medicine. In Sweden, average awards were $22,000 in 2004. That’s far less than the median damages of $400,000 for U.S. medical liability cases in 2005, with 21% of awards topping $1 million, a 2008 Justice Dept. report showed. Still, the term “no-fault” may be a misnomer, because such systems still require a determination that something went wrong, Howard said. And some Scandinavian countries report claims to disciplinary authorities. It also remains unclear whether such approaches curb costs, Dr. Gray said. While they appear to eliminate extreme awards, they may encourage more of the smaller claims. In New Zealand, new medical treatment injury claims rose 8% between 2008 and 2009, according to an annual report by the Accident Compensation Corp., a national insurance company that provides personal injury coverage to all residents. It also becomes increasingly difficult to determine causation and draw the line as to what is compensable, as opposed to accepting all injury claims, said James R. Copland, director of the Manhattan Institute’s Center for Legal Policy. The bigger picture When examining foreign liability models, another factor is the larger social systems within that country, Dr. Gray said. “The medical liability system is often inextricably linked with the health care system.” For example, because Sweden, Canada and the U.K. have forms of universal health care coverage, the government covers most liability claims or subsidizes physicians’ coverage. As a result, settlements are more common in the U.K., and liability “doesn’t hit doctors in their pockets, so you don’t see as much defensive medicine” as in the U.S., Mason said. Nor is access to care as dire, because liability costs aren’t forcing doctors to limit their practices, Dr. Gray said, although such expenses do wind up in the national budget. As for potential constitutional barriers, Copland pointed to the U.S. workers’ compensation system as an example of successfully taking civil cases out of a jury context. “Given that precedent, a properly structured [medical liability] system could meet constitutional muster, but it’s important to keep constitutional requirements in mind.” Still, other countries are not immune from spikes in claims costs and frequency. Multimillion-dollar awards in catastrophic cases are not uncommon in the U.K., Mason said, “and what is really expensive is the cost of future care,” or economic damages. In 2008, the Council of Europe convened to address what it called an “ever-growing” challenge of rising claims and costs, and to explore alternatives. Experts agree that transplanting foreign models wholesale into the U.S. would be practically infeasible. Nevertheless, dramatically lower liability costs and other cultural differences suggest room for improvement in the American system, Howard said. Elsewhere, “people just don’t see the legal system as a way to get rich,” but rather as a last resort, he added. And cost isn’t the only concern in the U.S. “At some level, it doesn’t matter how much the cost is as long as people trust the system,” he said.